From Equity Research
The 2019 bull market rally was sustained in December with equity indexes closing out the year in solidly positive territory albeit giving back some gains at the start of the New Year following the airstrike in Iran. For the full year, 2019 proved to be outstanding for equity investors with the S&P 500® closing out with a performance among the best in the past 50 years. The solid gains in the market were far from expected a year ago after the sharp market pullback in December 2018 following Fed rate hikes. Sentiment started to shift in January 2019, as Fed Chair Powell announced the Fed would ‘pause’ on its interest rate hiking strategy that was subsequently followed by three, 25 basis point, rate cuts as 2019 progressed with the Fed shifting to an easing stance. Lower rates drove a marked expansion of P/E ratios with the forward market multiple expanding from ~15.5x to the current ~18.6x during the year. During December of 2019, the VIX Index or “fear gauge” was relatively stable generally tracking around the 13 level before inching into the 15 range near month end. For the full month of December, all three major equity indexes rose sharply with the Dow Jones Industrial Average up 1.7%, the S&P 500 index up 2.9%, and the smaller cap weighted Russell 2000® up 2.7%.